US stock futures moved modestly higher on Friday as investors awaited fresh business activity data while continuing to assess renewed pressure in bond markets, corporate earnings and Washington’s plans to impose sweeping sanctions on Iran.
Discount retailer Ross Stores (NASDAQ:ROST) was also in focus after raising its full-year earnings guidance following stronger-than-expected second-quarter results.
US futures recover after bond market pressure
Wall Street futures pointed to a slightly firmer open after rising government bond yields weighed on equities during the previous session.
By 03:11 ET (07:11 GMT), Dow futures were up 65 points, or 0.1%, while S&P 500 futures gained 14 points, or 0.2%. Nasdaq 100 futures advanced 115 points, equivalent to 0.4%.
US equities had finished lower on Thursday as sovereign bond yields resumed their climb following a sharp decline earlier in the week.
The US Treasury Department had provided temporary relief on Wednesday by announcing plans to increase purchases of longer-dated government debt. The move initially calmed concerns after the 30-year Treasury yield approached its highest level in almost two decades.
However, the bond rally quickly lost momentum.
Analysts at Vital Knowledge said comments from US Treasury Secretary Scott Bessent during a CNBC interview failed to provide lasting reassurance and were potentially “counterproductive by conveying both panic and powerlessness” in the face of broader pressures pushing yields higher.
Those pressures include the energy shock associated with the Iran conflict, expanding US fiscal deficits and rapidly increasing spending on artificial intelligence infrastructure.
Retail earnings add to concerns over US consumers
Investor sentiment was also affected by disappointing results from Walmart, according to Vital Knowledge.
A series of underwhelming earnings reports from retailers this week has increased scrutiny of the health of American consumers, particularly as households continue to contend with elevated living costs.
Investors are watching the sector closely for signs that inflation and higher borrowing costs are beginning to have a more significant impact on discretionary spending.
US PMI figures in focus
Markets will receive preliminary August US business activity figures on Friday, providing another indication of how the economy is coping with higher oil prices and changing expectations for monetary policy.
Business activity has so far remained relatively resilient despite the energy price shock generated by the Iran conflict and growing speculation that central banks may need to raise interest rates to contain inflation.
Deutsche Bank analysts noted that the US composite purchasing managers’ index, covering both manufacturing and services, reached its highest level of the year in July.
For August, S&P Global’s US services PMI is expected to ease slightly to 53.9, while the manufacturing PMI is forecast to rise to 54.0. Readings above 50 indicate an expansion in activity.
Ross Stores raises annual earnings forecast
Ross Stores (NASDAQ:ROST) shares jumped more than 8% in extended trading after the discount retailer raised its annual profit outlook and reported second-quarter earnings ahead of market expectations.
Alongside rivals Burlington and TJX, as well as online competitors such as Shein and Amazon, Ross has been expanding its value-focused merchandise as consumers seek cheaper alternatives amid concerns about higher living costs.
CEO Jim Conroy told investors that customer spending had strengthened across merchandise categories and geographic regions, with particularly strong demand in the company’s home and cosmetics businesses.
Ross now expects annual earnings per share of between $8.61 and $8.77, substantially above its previous forecast of $7.50 to $7.74.
Adjusted earnings for the latest quarter reached $2.06 per share, exceeding expectations of $1.94, according to LSEG estimates cited by Reuters.
US promises “toughest sanctions in history” on Iran
Geopolitical developments remained another major focus after Bessent said Washington was preparing severe new sanctions against Iran, reinforcing President Donald Trump’s threat to wage economic warfare against Tehran.
“It is a one-two punch. We have the blockade, and we are going to have the toughest sanctions in history,” Bessent said in an interview with CNBC, adding that he will hold a press conference on Monday to outline the details of the plan.
The Treasury Secretary also urged China to cooperate with the sanctions programme, although Beijing has largely criticised proposals for additional restrictions against Iran.
Bessent’s remarks followed Trump’s warning on Wednesday that Iran faced “economic warfare and isolation on an unprecedented scale,” with the president arguing that months of US military and economic pressure had significantly weakened Tehran.
Iran rejected the threats, with Foreign Minister Abbas Araghchi accusing Trump of attempting to distract attention from domestic US issues, particularly the country’s rising debt burden.
Brent crude retreats but remains on course for weekly gain
Oil prices moved slightly lower following Bessent’s comments, retreating from one-month highs while remaining elevated as the confrontation between Washington and Tehran over the Strait of Hormuz showed little sign of resolution.
Brent crude futures fell 0.4% to $93.41 a barrel, while West Texas Intermediate futures declined 0.6% to $86.36.
Despite Friday’s pullback, Brent remained on course for a weekly increase of more than 5%, which would mark a second consecutive week of strong gains.
With the outlook for the Strait of Hormuz unresolved, energy prices, bond yields and the implications for inflation are likely to remain central considerations for investors alongside Friday’s US PMI figures.